Sony-Columbia Pictures: Lessons from a Cross Border Acquisition

The write-off had a severe affect on Sony's financials with the company reporting a net loss of $3.1 bn for the six-month period ending September 1994, as compared to a $578 mn net profit for the same period in 1993. The write-off also led to a sharp decline in Sony's share price at the Tokyo, New York and London Stock Exchanges. At this point, Sony decided to take an active part in the management of its movie business and initiated a cost-cutting exercise at SPE, through Alan Levine (Levine), president of SPE. In 1995, the marketing and distribution arms of Columbia and TriStar were consolidated in order to reduce costs and other overheads. Attempts were also initiated to bring back some stability in SPE's management, which was in a chaotic condition...

He said, "When I got here, there were three movies being made that nobody even knew anything about. No one knew who had approved them. They just grew here through some spontaneous generation." Calley cancelled SPE's open-ended, multi-million deals with five independent producers and tried to confine the production costs to the amount laid out by Sony headquarters. Under Calley's leadership, apart from eliminating extravagance from its production and marketing, SPE also reduced the number of vendors it dealt with from 14,000 to 800, which helped it reduce its production costs. Calley also speeded up the decision-making process by thinning the ranks of SPE, and combined the Columbia and TriStar operations, eliminating duplication of infrastructure and development team costs...